EDITOR’S NOTE: This is a summary of RAC University’s live Webinar, “Risky Business: Outpatient Therapy: Learn How to Prevent Risks to Your Hospital,” presented by Nancy Beckley, President of Nancy Beckley & Associates LLC. The article appears courtesy of The Report on Medicare Compliance.

The selection of the principal diagnosis, which drives MS-DRG assignment, is a vulnerability for hospitals in many audits. As RACs and other auditors validate MS-DRGs separately or during medical necessity reviews, they are downcoding MS-DRGs on the premise that the principal diagnosis code is incorrect.

“This is one of the main reasons we see denials from RACs” and other payers, says Sandra Routhier, senior healthcare consultant with Panacea Healthcare Solutions. “Principal diagnosis selection is a tough thing.” Errors in this area are caused by imperfections in documentation, complexities in coding and sometimes a lack of experi­enced coders, she says.

The Uniform Hospital Discharge Data Set defines principal diagnosis as the condition which, after study, is “chiefly responsible for occasioning the admission of the patient to the hospital.” However, when two or more diagnoses equally meet the definition of principal diagnosis or when “two or more interrelated conditions” potentially meet the definition of a principal diagnosis, either one may be sequenced first, according to the ICD-9-CM Official Guidelines for Coding and Reporting. There’s nothing wrong with choosing the condition that leads to a higher-weighted MS-DRG, which pays more, but giving coders leeway with the principal diagnosis has opened the door to mistakes. Either coders misapply the rules or auditors ignore their right to pick between condi­tions when coding the principal diagnosis, Routhier says.

Some Sequencing Choices Are Clear

In many cases, sequencing of principal and second­ary diagnoses should not be a hardship, especially with appropriate use of physician queries, Routhier says. “Usually there is one condition that rises above,” she notes, yet coders may make errors. For example, she reviewed a case where a patient was readmitted to the hospital shortly after inpatient treatment for pleural ef­fusion with the placement of a chest catheter. The patient returned to the emergency room with hypoglycemia and was unresponsive, with low blood sugar of 31. Dur­ing the first 24 to 48 hours of the inpatient admission, the hospital concentrated on controlling the patient’s blood sugar. Although pleural effusion was present on admission, extended the hospital stay and is codable, it wasn’t the principal diagnosis. That honor belonged to the diabetic coma. “Some of these are clear-cut, but lib­erties are being taken when more than one condition is present on admission,” she says. If this case were subject to DRG validation, the RAC would send a letter to the hospital saying something along the lines of “medical record documentation supports the diabetes as the acute condition causing the admission” and then change the MS-DRG payment.

It’s Not All Black and White 

Not everything is black and white. In addition to following the general sequencing rules for principal and secondary diagnoses, coders may have to apply rules in other sections of the coding guidelines. For example, Sec. I.C.1.b has directions on sequencing sepsis. If sepsis or severe sepsis is present on admission, is associated with a localized infection, such as urinary tract infection, and meets the definition of a principal diagnosis, then the systemic infection (i.e., 038.xx) should be sequenced as the principal diagnosis. But there’s an exception, Routhi­er says. If the sepsis is due to a post-procedural infection — maybe the UTI was caused by chronic use of a Foley catheter necessitated by a bladder condition — then the catheter-related infection is the principal diagnosis and sepsis is a secondary diagnosis.

Either way, it’s very complicated, she notes. “And documentation may not always lead to a clear conclu­sion.” If necessary, coders should query physicians to ensure documentation is clear for the sake of coding ac­curacy to report reimbursement, quality and data collec­tion. But she warns against querying busy physicians over every gap. “If it will potentially have an impact on DRG reimbursement or quality reporting, you will need to query,” she says. “If it is to further specify the fourth com­plication and comorbidity, it probably is not the best idea.” 

Respiratory Failure Is a Tough One 

The waters may get muddy because coders must mesh different sections of the coding guidelines — the index and tabular instructions — with Coding Clinic, the coding newsletter published by the American Hospital Association. “It’s not an easy thing,” she says. Suppose a patient presents at the emergency room in respiratory distress. His oxygen saturation is very low despite high levels of oxygen administered and the arterial blood gas result meets the criteria for acute respiratory failure. “What is causing it? Chronic obstructive pulmonary dis­ease exacerbation? Congestive heart failure? Pneumonia? And which condition should be sequenced as the prin­cipal diagnosis? Coding Clinic has published more than 30 entries on the subject,” Routhier says. In fact, in the first-quarter 2005 edition alone, there are eight examples to illustrate sequencing for acute respiratory failure, she says. To try to get at the answer, Coding Clinic refers back to the definition of principal diagnosis, which says if the emphasis of the admission was acute respiratory failure, it can be sequenced as the principal diagnosis — not the underlying condition. If the acute respiratory failure is principal and pneumonia is secondary, the MS-DRG is lower-weighted and reimbursement is lower for the hospital. If it’s reversed, however, the hospital is paid more. “It becomes challenging for the coder to make that determination,” she says. “If I get a denial from the RAC, I can make a good argument either way because either one could have occasioned the admission. Sometimes you can’t draw a line in the sand because there may be two interrelated conditions that occasion the admission.”

Coding Updates Change the Picture

Sometimes codes evolve and the associated tabular instructions may have an effect on sequencing. Routhier cites the case of an inpatient admission coded with a principal diagnosis of Alzheimer’s disease (ICD-9-CM 331.0) and a secondary diagnosis of acute encephalopa­thy (348.30). Patients typically aren’t admitted to acute-care facilities with Alzheimer’s, she says, which explains why the RAC downcoded the MS-DRG. In a letter, the RAC wrote to the hospital that “upon review of the doc­umentation, code 331.0 is unsupported as the principal diagnosis….It was clearly documented that the patient was admitted because of acute encephalopathy. Since encephalopathy was the reason for admission, code 348.3 will be the principal diagnosis and code 331.0 becomes secondary. The correction changed the submitted DRG of 056 to DRG 071. The medical director reviewed this claim and agrees with the rationale.”


But there’s a twist. In an update to ICD-9-CM, code 294.11 was introduced for dementia in conditions clas­sified elsewhere with behavioral disturbances, such as aggressive or violent behavior. The tabular instructions, which provide sequencing guidance for code assign­ment, say that underlying conditions, such as Alzheim­er’s (331.0), should be coded first. For code category 331, there is a tabular instruction to use an additional code to identify dementia. Cases in which patients are admitted for mental status changes like confusion can be challeng­ing and may require a physician query to clarify what condition led to the inpatient admission, Routhier says. Even a UTI in the elderly can have an effect on mental status, she says.

Routhier says that selecting the principal diagnosis requires inpatient coders to understand disease pro­cesses and anatomy and physiology and have the ability to draw conclusions from the information recorded by physicians in the medical records. Complicating matters, multiple physicians may document in the same chart. Different physicians (e.g., hospitalists) may write the his­tory and physical, daily progress notes and the discharge summary, and vary the terminology, she says. “One doc­tor will say acute renal insufficiency while another says acute renal failure. One will document sepsis while the rest of them don’t mention it at all. It creates challenges in final code assignment when there are conflicts in docu­mentation,” Routhier says. 

Coders Can Be Consulted on Disputes

At Hanover Hospital in Pennsylvania, coders are routinely consulted on disputes over claims denials, says Compliance Auditor Laura Ehrlich, who “aggressively appeals everything.” Ehrlich gets their take on why they coded the way they did and why they didn’t code it the way the RAC says they should have. She toyed with coders writing appeals but it is more effective for them to cite their rationale for coding diagnoses and then craft the appeals herself. The four inpatient coders at her 100- bed hospital can quote chapter and verse of Coding Clinic, especially for discussions about principal diagnosis. Cod­ers know when RACs downcode MS-DRGs based on an older edition of Coding Clinic, she says. “We’ve only lost a few appeals.”

DRG validation denials by RACs and other payers are helpful case studies for hospitals to use in coder edu­cation, Routhier says. She also recommends peer review in hospital health information management departments. Coders can recode each other’s records and see how things turn out. “Like medicine, coding is not an exact science,” she says. There are instances where coders have a different outcome and both can justify their rationale, which is a good learning experience and a revelation in terms of appealing claims denials.

RAC Denials Are Good Learning Tools

It’s also very helpful for coders, especially at smaller hospitals with fewer resources, to sit in on physician con­tinuing medical education sessions, Routhier says. The more medical information they gather, the more accurate their coding will be.

“The emphasis should be on improving skills, not slapping your hands because the coders got it wrong one time.”

Contact Routhier at srouthier@panaceahealthsolu­tions.com and Ehrlich at ehrlichl@hanoverhospital.org.

About the Author

Nina Youngstrom has been writing The Report on Medicare Compliance since 1992 and has a reputation for being one of the most knowledgeable journalists and incisive writers in the field. With excellent contacts at the IG’s office and at CMS, and strong relationships among industry experts and line compliance officers, every week Nina’s Report on Medicare Compliance has inside news you won’t read anywhere else.

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